Wednesday, March 19, 2008


Republicans are supposed to be strong on foreign affairs; Democrats, better on the economy. During times in which the nation senses that it is at risk from powers abroad, at least since the association of the Democrats with the peaceniks of the 1960s, the electorate has favored the Republican Party. During times of nervousness about the economy, they have turned to Democrats. Bill Clinton knew this when he made the mantra of his 1992 campaign, "It's the economy, stupid!" We believe this, in good part, because of deeply ingrained memories of FDR and our collective belief that the Democrats will have the good of ordinary citizens in mind. We don't mind that Republicans favor the rich as long as we believe that we'll get rich any moment by flipping houses; it's when the housing market goes bust that we decide that we were against the plutocrats all along.

Yet, this time, the viable candidates for the Democratic nomination thought they could run against the strengths of the Republicans - namely, that they could run against the prosecution of the Iraq War. The debate became one in which it was argued who repudiated the war sooner, and who would withdraw the troops quicker. For all three of the currently viable candidates, the war overshadowed the state of our economy. At least until this week. Meanwhile, John Edwards is wishing he'd stayed in a bit longer...

Now, suddenly, events have outstripped their plans, and the response of the candidates has been pathetic. It's difficult to imagine how it could be otherwise: not only have they not really focused on the economy, but even if they had, it's doubtful they would have any inkling about the more fundamental forces that have brought us to this pass. In fundamental respects the various candidates don't really differ in their views of the economy. Yes, there will be differences in tax policy and government expenditures, and these differences are not without substantial consequences. But, far more fundamentally, they are all running on a platform of Growth - the one object that defines modern liberal democracy and about which people, for all their vaunted diversity and "the fact of pluralism" - nevertheless embrace as an identical goal. For that shared and unquestioned end they are willing to overlook a host of systemic time-bombs we've tucked away in our midst in order to maintain the appearance of growth. In response to the systemic breakdown of our financial markets - the lifeblood of the modern growth economy - not one seems to have a clue about the root causes, or any plausible solutions. As reported in the Bloomberg article (linked above), all three have adopted a "let the Fed handle it" stance. None of the candidates dares to second-guess the Fed at this point, since, as the lender of last resort, it is their only hope to keeping the whole creaky ship afloat. Most revealing about this deeper level of agreement should be our suspicion that the Chairman of the Fed is actually running things, and the race for the Presidency is a nice way of sustaining our belief that popular will matters.

Hillary! - the candidate who claims she would be ready to lead on Day One - had this response to the crisis: our current economic situation "is a really serious piece of business" and said she would seek "advice and counsel from a broad range of economic advisers" (Translation: "I haven't got the damnedest idea of what's going on"). Moreover, to show her seriousness about the high price of oil, she called for a release of oil from the federal government's strategic reserve "as a signal to OPEC that we're not going to stand idly by." I'll bet OPEC is quaking in its sandals, knowing that we'll sell amassed oil purchased at cheaper prices from the Saudis so that we'll have to refill it in coming months when it's more expensive. All for gasoline that will be cheaper by 3 cents per gallon for a month or two. If this is what constitutes the sort of emergency for which the Strategic Reserve was created, then what will we call actual oil shortages that appear to be increasingly likely in our not-too-distant future?

At least John McCain had the honesty to admit that he doesn't know much about the economy. There's the straight-talk express for you.

How about thinking outside the box? It's interesting to recall that the Fed was partly the creation of the populist perennial Presidential candiate, William Jennings Bryan. He saw it as a necessary public counterpoint to massive private industries, a public trustee of common weal. He believed it would represent and act on behalf of all the main players in the economic system, and argued that on its Board should sit a farmer, a wage earner, and a small businessmen, in addition to representatives of financiers. We accept without question - as if it were so mandated from on High - that the Fed is comprised of, and works on behalf of, the financial powers. Why should we accept that as God-given? What would be different if the Fed enacted policy with ordinary citizens, workers, farmers in mind, ones who might argue on behalf of a set of priorities and goods that did not boil down to the brutal efficiency of itinerant global plunder? In part it's difficult to imagine because it would require us to consider a polity with a different set of priorities. We might, for starters, think differently about the economy, as a set of relations and interactions that is aimed at more than profit, but which rightly accounts for goods beyond efficiency and maximum return. We might add the worth of small and local businesses and their investment in their communities; the good of small farmers and widespread ownership of property by families who provide for their daily bread from the sweat of their own brow; of the virtues of frugality, self-governance and moderation. I much doubt these are considerations or words that have ever been spoken during a meeting of the Fed, and won't be during the Presidency of any of the current candidates, for all their purported differences.


prophet said...

What connection might there be between the role of assumed continuing (and inexorable) progress in Hannah Arendt's dissection of Totalitarianism, and our own assumption of continuing (and inexorable) growth, today?

A step removed, perhaps, but ultimately we equate 'growth' with 'progress'. Granted, there have been some indications of a pulling back from a 'bigger is better' mindset, but what can you say about a mindset that does so by saying 'less is more'?

Dad29 said...

The history of the Fed is interesting. It was put into place to replace the existing (but somewhat uneven) system whereby local Banks 'pitched in' to assist another local Bank which was in trouble.

That at least partially caused the 'bank holiday' problem in 1929; local banks no longer 'pitched in' b/c the Fed was supposed to do so.

m_david said...

I've never seen any reason for the Fed to exist.

US currency could simply be printed on a formula based on the price of natural resources, or just go back to gold. Much better system.

Clare Krishan said...

Even the chauvinists (French form of Calvin's patronym) over at Acton

seem to recognize the error of our ways, quoting --oh horror, reformed Marxist (history as Darwinian time-value of life, positive perfection of existence) -- Prof. McIntyre:

"Any invention, any discovery, which consists essentially in the elaboration of a radically new concept __cannot be predicted__ for a necessary part of the prediction is the present elaboration of the very concept whose discovery or invention was to take place only in the future. The notion of the prediction of radical conceptual innovation is itself conceptually ___incoherent___."

(my __emphasis__)